Think you make too much money for your kids to get financial aid for college? There’s a good chance you’re wrong.
So says Buzz resident Brannon Lloyd, a bearded and blunt college planner on the seminar circuit. He takes a topic that manages to be simultaneously scary and dull and, with rapid-fire delivery, spurs sleepy audiences to frantically scribble notes.
If you’re new to the college-admissions process, every word seems like manna.
“Private schools are often cheaper than state schools. Ignore the list price.”
“You can negotiate with a college, but don’t call it that. Call it ‘review’ or ‘appeal’ and show competing offers.”
“It is less expensive to send two kids to college at the same time, the way the formulas work.”
At a recent PTO meeting at the High School for the Performing and Visual Arts, these were some of the first bombs Lloyd threw into the room. Parents sat up and reached for pens and paper. Their notes looked something like this:
- Apply to some less prestigious schools that would consider you a top recruit, in the top 10-20 percent of incoming freshmen. They will give you money.
- Consider private schools. Although the sticker price is high, many give away lots of money. Also, you’re more likely to graduate in four years from a private college.
- Only a tiny percentage of available college money is in private scholarships. The rest is from the government and the college. Focus first on those options.
- Don’t make lots of income in your child’s “base year,” the year before college starts.
- Most money in the child’s name – savings accounts, etc. – counts against you more in financial-aid formulas. Kids should take out Roth IRAs with money they earn.
- A trust in the student’s name often counts against you. You can move the money back to a trust later. Or spend it on a major-related summer program during high school, especially at a college of interest.
- Loans make college more expensive, not less. Try for free money first.
- Sticker prices aren’t the real price.
- Google “cost of attendance,” or COA, and the name of the school to add in room/board, fees, books, etc.
- Google the school’s name and “net price” for a calculator to see how much financial aid you can expect and your EFC, “expected family contribution.”
- Don’t assume you make too much money to be eligible for financial aid. Fill out the forms.
- When you fill out the FAFSA (Free Application for Federal Student Aid), don’t list assets you don’t have to, including your primary residence and retirement accounts.
- The older the oldest parent, the more assets you get to exclude.
- Apply to exactly eight schools. Too many, and the colleges see you as a long shot. Too few, and they see you as too eager for their school. They know the schools you apply to because you list them on the FAFSA form.
- Alphabetize the schools on your FAFSA. Otherwise, if you list a college first, it will think it’s your first choice and that it doesn’t need to lure you with money.
- The optimal date to send in the FAFSA is Jan. 18. Don’t wait until your taxes are done. Once you file your taxes, update your FAFSA.
- Do not file an extension on your taxes that year. The colleges will not release money to you until your taxes are done.
- Check out Texas’ student-loan site, hhloans.com. It may offer lower rates than the federal loans.
- The Abe and Annie Seibel Foundation gives interest-free loans to Texas students going to Texas colleges.
- Avoid scholarship scams. It’s free to apply for a scholarship.
- The PSAT is as important as the SAT for getting a scholarship.
- Best scholarship book: Peterson’s Scholarships, Grants, and Prizes.
- Best scholarship website: fastweb.com. But they sell your information, so use a new, unique email address to sign up.
- Another good scholarship site to visit: collegeboard.org
- Good site for college reviews and breakdown of majors, but take with grain of salt because student-reported: collegeprowler.com
- If you want ethnicity-based scholarships, apply to a region and college that needs you the most, where you are not the ethnic majority.
- Grades are the most important factor for admissions; standardized test scores are the most important factor for financial aid.
- Look for a school that has a new major/program it wants to fill with students.
- Look for a school that is very strong in one major and then apply under a different, lesser-known major.
- If you apply binding early-decision, you have a 30 percent greater chance of being admitted. But early-decision means you will get less financial aid since you have promised to attend.
- Don’t let schools know they are first choice until final appeal when you show them competing financial-aid offers at other schools.
- While well-intentioned, 529 plans can reduce the money given by colleges because the college knows you must spend that money on education.
- The College Board’s CSS (College Scholarship Search)/Financial Aid Profile form is easy to fill out incorrectly, so be careful. It’s used by fewer than 400 schools, but they are the better schools.
- If grandparents help pay, they should write a check to the parents or child, not directly to the school. It can cause the college to reduce aid.
- When you pay tuition, line itemize the fees and don’t pay for what you don’t want – parking, sports tickets, etc.
- Health insurance often is cheaper through the university than your family plan.
At this PTO seminar, Lloyd, who has children at Carnegie Vanguard High School and Pin Oak Middle School, said he was on a mission to demystify the admissions process. He also hoped to drum up a few clients for his company, The College Money Guys, which provides student counseling as well as college admissions and financing services. For those who can’t or won’t pay the several thousand dollars, he said, families certainly can tackle college funding themselves.
One local parent, Dr. Helene Sheena, did just that, along with her oldest daughter, Michelle, who received multiple offers and accepted a full-ride scholarship to Tulane University. It helped that Michelle made good grades, played sports, volunteered and was a longtime Girl Scout.
Michelle is a Lamar High School graduate, and her two younger sisters, Brittney and Erin, both go to Lamar. Their mom says the high school guidance counselors (and Google) helped them find scholarship opportunities. And mom attended all the college-prep talks. “I went to every one of those. Even once I had heard it all, I kept going,” she said. “Start planning early. It’s just a matter of planning.”
Also, she says, some universities will tell you up front what tuition discount you are likely to receive based on your GPA and scores, assuming you are accepted.
It’s no secret that students don’t all pay the same tuition. Last year, the average tuition discount rate for full-time freshmen at private schools was 45 percent, according to a survey released by the National Association of College and University Business Officers. Public schools also offer some discounts, and, in some situations, offer in-state tuition to out-of-state students.
A lot of tuition discounts go to high-achieving and/or low-income students, and advice to middle- or upper-income families on how to get a piece of the rest varies. Each family’s situation is unique, and the guidance out there isn’t consistent.
While Lloyd preaches against 529 plans because they count against you in the need-analysis formulas, other advisors say the penalty is minimal.
Christopher Maurer, a certified financial planner, says it depends, but Roth IRAs or life insurance generally are good choices: “An equal amount of money in a 529 plan would result in less financial assistance than would the same amount of money positioned in cash-value life insurance or a Roth IRA. All three provide for no tax deduction when money is contributed, tax-free/deferred earnings and tax-free distributions. However, if the child does not go to college or the money isn’t needed for education, the funds in the Roth IRA or life insurance can be used for the parents’ retirement.
“A client of mine (husband and wife) retired in their early 50s. Their daughter elected to go to an expensive out-of-state college. Most of their wealth was positioned in exempt assets – life insurance, retirement accounts and home equity. While their cash flow is high, their taxable income is low due to how we have it structured for tax purposes. Their daughter received significant financial aid even though the family’s net worth is in excess of $3,000,000. Had there been no 529 plan, their daughter would have received in all likelihood received an even greater amount of financial aid.”
Maurer says another creative planning technique is for parents in a high tax bracket to give appreciated assets, such as stock, to their 18-or-older child, who most likely is in a 0 percent tax bracket. The child can then sell the stock, paying no taxes.
A finance-savvy, middle-income Buzz parent with a child at The University of Texas at Austin says her daughter didn’t qualify for aid. She relies on cash-flow strategies, the annual $2,500 American Opportunity federal tax credit and the UT-offered payment plan to avoid debt.
She recommends Zac Bissonnette’s Debt-Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships, or Mooching off My Parents.
To leave a comment, please log in or create an account with The Buzz Magazines, Disqus, Facebook, Twitter or Google+. Or you may post as a guest.